Firms' exposures to geographic risks. (April 2022)

• Record Type: Journal Article
• Authors: Dumas, Bernard; Gabuniya, Tymur; Marston, Richard C.
• Is Part Of: Journal of international money and finance. Volume 122(2022)
• Publication Date: 2022-04
• Subjects: Exposure -- Country risks -- Geography -- Business risk -- Stock returns -- Country indexes; International finance -- Periodicals; Foreign exchange -- Periodicals; Finances internationales -- Périodiques; Change -- Périodiques; Foreign exchange; International finance; Periodicals; 332.04205
• DOI: 10.1016/j.jimonfin.2021.102549
• Languages: English
• ISSNs: 0261-5606

Abstract

Highlights: The distinction between domicile and place of business is becoming more and more relevant. In most statistical studies, a firm is included in a country's index if its headquarters are located in that country. We propose, instead, to measure the firms's exposures to "geographic zones" according to the place where they conduct business. As a representation of "geographic risks", we synthesize zone factors from all firms in the dataset. And we show the properties of the exposures to the zone factors. Abstract: The distinction between domicile and place of business is becoming more and more relevant as a growing number of firms have activities abroad. In most statistical studies of international stock returns, a firm is included in a country's index if its headquarters are located in that country. This classification scheme ignores the operations of the firm. We propose, instead, to measure the firms's exposures to "geographic zones" according to the place where they conduct business. As a representation of "geographic risks", we synthesize zone factors from all firms in the dataset, be they domestic firms or multinationals. And we show the properties of the exposures to the zone factors.